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Trends Direct investors move out when markets turn volatile: Karvy

Direct investors move out when markets turn volatile: Karvy

IFAs hold onto investors longer
Daya R Mar 14, 2017

Investors who invests through IFAs stay put for long term, reveals Karvy data.

IFAs account for the maximum number of investors who have redeemed only after a five-year holding period. In fact, nearly 40% of their investors had a holding period of more than two years, finds the report.

According to a Karvy report, which analysed investor behaviour in a stable market and a volatile market, while direct investments have increased, investors who invested mutual funds through direct plans redeemed their investment when the markets turned volatile.

“Over 80% of the redemptions were carried out with a holding period of less than one year in case of direct investments. This clearly indicates that as soon as markets turned volatile, direct investors decided to move out of mutual funds while distributors, especially IFAs, could convince their investors to stay invested for benefits of long term investments,” it says.

“It is clearly evident that direct investors get worried due to lack of guidance and take a decision to leave the fund as soon as the markets turn choppy. Mutual fund is not a product meant for short term investments,” says the report.

Commenting on the effectiveness of the IFA channel, Manjula S an IFA from Bangalore says, “Direct investors get worried due to lack of guidance and take a decision to move out of the fund as soon as the markets turn volatile. Mutual fund is not a product meant for short-term investments. Only an advisor can give the proper motivation in volatile market conditions.”

Talking about the need for and IFA even to the most seasoned investor, Deepali Sen an IFA based out of Mumbai says, “Though an IFA myself, I have hired an advisor to take care of my financial planning. This takes off the pressure. Also as a third person he is able to take logical rather than emotional decisions.”

 

2 Comments
Keyur Mehta · 1 month ago
Grand total figures for above table are mentioned in below and vice versa which needs to be corrected
nK MEHTA · 1 month ago
DIRECT INVESTORS .. ALWAYS PUT FUND MANAGERS IN DIFFICULTIES .SEBI SHOULD GIVE A THOUGHT .
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